This paper entails an analysis of the employee benefits practices in Australia and makes a direct comparison with the practices carried out in the U.S. The employment law in Australia requires that employers offer key benefits, failure to which the employer is liable for breach of the legal requirements. Among the important benefits that are legally mandated as employees’ benefits in Australia, include salary, superannuation, annual leave, and sick leave, parental leave, and long service leave (McKnight, 2013). Salary represents the pay to the staff for their services and is influenced by factors such as minimum wage and Fair Work Act. Superannuation refers to the money that is set aside during an individual working life and invested through the superannuation fund and contributed for a person’s retirement. The Australian law requires that all employees, apart from casual employees, to be provided with paid annual leave, which is influenced by their ordinary hours of work. Parental leave is comprised of leaves such as maternity leave, paternity leave, and adoption leave. Long service leave refers to days of paid leave that all employees are guaranteed for having worked in the same business for a long period of time normally 10 years of continuous service.
Retirement Benefit Practices in Australia
The specific benefit being analyzed in this paper is the retirement benefit plan. Australian retirement income system is made up of three components, which include a means-tested age pension, funded via general taxation revenue, the superannuation guarantee, which is a mandatory employer contribution to private superannuation savings, and voluntary superannuation, and other private savings (Agnew, 2013). The superannuation is encouraged through taxation concessions. The savings accounts mandate employers to make a contribution of 9% of the pay for each worker. The mandatory nature of the savings requirement is essential in solving the pension coverage issue.
Retirement benefit practices in the United States
The retirement benefits in the United States are under the regulation of the Department of Labor using the provisions indicated by the Employee Retirement Income Security Act (ERISA). ERISA seeks to protect the assets from America and ensure that their funds under the retirement plans in their productive lives will be available when they retire. Retirement plans in the U.S. are categorized as per how the benefits are established. The classification of retirement plans includes defined benefit plan and defined contribution plan. A defined benefit plan is funded by the employer and promises a specific monthly benefit at retirement. On the other hand, a defined contribution plan does not specify the exact benefit amount at retirement. Other retirement plans in the U.S. include simplified employee retirement plans (SEPs), where an employer remits contribution on a tax-favored basis to individual retirement plans owned by employees. The other retirement plan is 401(k) plan that allows the employee to contribute from the pay before taxes are deducted and the employee stock ownership plans, which entails the contribution plans that are invested primarily to employer stock (Medill, 2000).
Comparison of Retirement Benefits between USA and Australia
Among the major similarities between the retirement benefits system in the U.S. and Australia is that the retirement system offers a platform of offering tax incentives. In both systems amount contributed by the members is liable for tax relief. In the U.S., the tax incentives are placed in the retirement plans especially 401(k)s. Other similarities for the two retirement systems is that they are both three-tiered systems.
There are distinct differences between the retirement plans in Australia and the United States. In the American retirement plan, the requirement sets the contribution at 6.2% by the employer and employee. This is different from the retirement plan where the employers are mandated to make a contribution of 9% of the pay for each worker. Another key difference is that as opposed to the 401(k)s, loans from the retirement saving plans are not permitted and pre-retirement withdrawals are not allowed (Eisenberg, 2013).
Agnew, J. (2013). Australia’s Retirement System: Strengths, and Reforms. Retrieved from http://crr.bc.edu/briefs/australia%E2%80%99s-retirement-system-strengths-weaknesses-and-reforms-2/
Eisenberg, R. (2013). To Solve the US Retirement Crisis, Look to Australia. Forbes. Retrieved from https://www.forbes.com/sites/nextavenue/2013/08/19/to-solve-the-u-s-retirement-crisis-look-to-australia/#5354a25347b5
Medill, C. E. (2000). The Individual Responsibility Model of Retirement Plans Today: Conforming ERISA Policy to Reality. Emory LJ, 49, 1.McKnight, L. (2013). 5 Types of Benefits You Must Provide to Your Employees. Retrieved from https://legalvision.com.au/5-types-of-pay-and-employee-benefits-you-must-provide/
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